Robinhood CEO Admits Communications Shortcomings, Ahead of House Testimony.
In a complaint filed Monday, Feb. 8, 2021, the family of a novice stock trader killed himself. He mistakenly believed he lost more than $700,000. They are suing Robinhood Financial, claiming the popular stock trading platform’s business practices “directly” led to their son’s death. (Patrick Sison/AP)
The trading app popular with young investors could have better explained why it restricted the buying of heavily shorted stocks. They got caught up in the social media-fueled trading frenzy around GameStop Corp, said the company’s chief executive officer.
“No doubt we could have communicated this a little bit better to customers”. Vlad Tenev said late Friday on the All-In Podcast. The hosts of which include Chamath Palihapitiya, and Jason Calacanis. They had strongly criticized Robinhood over the trading restrictions, and are Robinhood investors.
Tenev’s comments came ahead of his scheduled Feb. 18 U.S. House Financial Services Committee testimony about the trading turmoil and Robinhood’s role in it. The CEOs of Citadel Securities, Melvin Capital, and Reddit will also testify.
No response to a request for comment.
Robinhood Outraged Many Of Its Customers
Many of Robinhood’s customers were outraged when on Jan. 28 it restricted the buying of 13 heavily shorted stocks. They had been driven to record highs, including GameStop, whose shares had surged more than 1,600%.
The moves were due in part to retail investors coordinating on sites like Reddit’s WallStreetBets. They drove prices higher and force hedge funds like Melvin to unwind their bearish positions. Several other brokers also restricted trading in the shares.
Tenev said the restrictions were necessary. This was due to a large increase in deposit requirements by a post-trade regulator. This was not spelled out in automated emails sent to Robinhood customers early on Jan. 28.
“As soon as those emails went out, the conspiracy theories started coming. My phone was blowing up. How could you do this, how could you be on the side of the hedge funds.” he said.
Robinhood CEO Admits, “We probably could have offered more detail into that. With the foresight that maybe customers would think that a hedge fund forced us to do it,” he later said.